Equity REIT

Not every REIT holds property the same way. The XXI-A workbook splits REITs into types by what they actually own, and an Equity REIT is the straightforward one: it owns and manages commercial real estate properties, and generates income primarily through rent.

Contrast this with a Mortgage REIT, which does not own buildings at all. It holds real estate loans and mortgage-backed securities, and earns interest instead of rent. A Hybrid REIT blends both approaches, earning rental and interest income together.

Classification (Chapter 6, section 6.3). The workbook's REIT table gives three types:

An Equity REIT's return depends on occupancy and rental rates in the properties it owns, the same drivers that decide a landlord's income. A Mortgage REIT's return instead depends on interest rate spreads and borrower credit quality, a fundamentally different risk. The workbook does not give a numeric split, such as a minimum percentage of assets in direct property, that defines an Equity REIT in India; that detail sits with the general REIT entry's rupee thresholds, not with this classification.

Two REITs list on the same day, each raising ₹1,000 crore.

Prakash Equity REIT buys four operating office parks in Bengaluru and Pune, leased to IT companies at market rents. In its first year it collects ₹85 crore in rent and distributes most of it to unit holders, a landlord's income stream that rises or falls with occupancy and rent renewals.

Suvarna Mortgage REIT instead buys a portfolio of commercial mortgage-backed securities and directly originated real estate loans, earning interest rather than rent from any building it owns. If interest rates rise, Suvarna's new lending earns more, but the market value of its existing fixed-rate loan book falls, a very different sensitivity from Prakash's rental income, which does not reprice with interest rates at all.

A PMS client choosing between the two is choosing between property ownership risk (occupancy, rental cycles) and credit and interest-rate risk (borrower default, rate spreads), not simply between two REITs offering a similar yield.

Chapter 6 (Collective Investment Vehicles), section 6.3, lists Equity, Mortgage and Hybrid REITs under 'Types of ReITs'. Expect a matching question — given an income source, rent or interest, identify the REIT type — and a question distinguishing an Equity REIT's direct property ownership from a Mortgage REIT's loan-based holdings.

• Equity REIT owns property and earns rent. Mortgage REIT owns loans and earns interest. The word "equity" here describes ownership of the underlying asset, not a stock-market instrument.
• A Hybrid REIT is not a third, separate income source — it simply combines the other two.
• Equity REIT is the workbook's default REIT type. When a REIT question does not specify a type, most REIT discussion assumes a directly-owned property portfolio.
• Do not confuse Equity/Mortgage/Hybrid, classified by what is owned, with Public/Private for InvITs, classified by listing status — REITs and InvITs use different type classifications in the same chapter.